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The challenges that await Maruti's next MD Kenichi Ayukawa

by ET Images: Reuters & ET Posted on 25 Mar 20132,044 Views Comments

Gloomy market conditions aside, Maruti Suzuki now has to deal with the anxiety of leadership transition with a change of its MD

 

 

 

Executives in the auto industry are a worried lot. Poor sales, weak demand, big discounts, high inventory and plant shutdowns have the industry making headlines for all the wrong reasons. But at Maruti Suzuki, India's top car seller, the anxiety at the HQ these days may be for an entirely different reason.

 

The Rs 37,000-crore company has just announced a top-level change. Shinzo Nakanishi, 65, managing director since 2007, will retire at the end of the month and Kenichi Ayukawa, 57, will take his place from April 1.

 

Any leadership transition brings in anxiety. But this one at Maruti is likely to be a difficult one as it comes at a critical time. The Indian economy is going through a rough patch and the auto industry is feeling the pinch. Any organisational change at this time is likely to distract, even if in a small way, from the business challenges.

 

It's also the fear of the unknown that is creating anxiety within sections of Maruti's executives. What is Ayukawa like as a leader? How much does he understand India? Will he understand the cultural differences like his predecessor? What will it take to gain his confidence?

 

With stark cultural differences between India and Japan, Ayukawa's lack of operational exposure in India and his "quiet, reserved demeanour" “as one company insider who did not want to be named put it” makes the situation even more challenging. As Ayukawa prepares to take charge, we outline five challenges that await him:

 

 

 

 

The War Within

 

Maruti contributes more than a third to Suzuki's global sales and about 40% of its global profits. Clearly, Maruti is critical for Suzuki's future. And understandably, global chief Osamu Suzuki will do everything he possibly can to ensure Maruti's future growth here. Now consider the fact that Ayukawa has no operational experience in India. Yes he headed Suzuki's Pakistan subsidiary and perhaps has some understanding of the cultural nuances of the region. But India is a different ballgame. The complexity of the Indian market, its competitive intensity and size of Suzuki's business here are of a very different order.

 

Yes, Ayukawa was also appointed part-time director on Maruti's board in 2008. And, since 2011, he has been in charge of Suzuki's overseas marketing, including India. This would have brought him to India every three to six months. This should have given him a good board-level view into the business here and some understanding of the Indian market. But the fact remains that Ayukawa has very little operational understanding of the India business. At a time when competition in the Indian market is set to intensify, this lack of India understanding will certainly be a big handicap for the new MD of Maruti Suzuki.

 

So why did Suzuki pick Ayukawa? Perhaps because it sees a bigger challenge that the new Maruti MD must deal with. Think about it like this, says a senior Maruti executive: for 30 years the engineers at the Japan HQ developed these small cars that sold really well in some "distant place" called India. In charge of all the critical decisions and development, Suzuki always called the shots and was in charge.

 

Now, suddenly, it sees the centre of gravity shifting. It has to train hundreds of Indian engineers in the most intricate parts of product development. The R&D centre in India is being scaled up and will be fully integrated with that in Japan for product development. Not just that, India will now increasingly be asked to do bigger things at a cheaper cost and faster speed, setting new benchmarks. "The child has now turned into an adult, now outpacing the parent. It is a huge internal organisational shift," the executive who did not want to be named says.

 

Maruti Suzuki chairman RC Bhargava is candid: "Over the years what we have seen is that Japanese and Indians do not always work in harmony with each other. Nakanishi's presence as India MD made it easy for Maruti to work with the HQ." As Suzuki Motors scales up its operations and expectations from India, it is important that there is minimal friction between the HQ and the Indian subsidiary.

The expectation is that Ayukawa, with his long career and HQ stint, will be able to leverage his network and relationships in Japan to smoothen the growth of Maruti Suzuki in future. This will be one of the biggest challenges that Ayukawa will have to deal with.

 

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